Here’s What Couples Need to Know About Merging Finances

A red and a blue string are knotted together.

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Personal finances embody deeply rooted emotional characteristics that shape one’s behavior toward their money. It’s important to remember that when sharing finances with a significant other, it’s not a one-size-fits all kind of deal. Individual emotions, trauma and beliefs around money will differ from person-to-person.

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As a financial adviser at Albert, a personal finance app where users can text me and our team for tailored financial advice, I see many questions around this topic. For example: My fiance and I are getting married. How should we save together for this goal? My partner just lost their job due to the pandemic — how long can we lean on one income before having to reduce our expenses? My partner and I are a new couple. Should we merge our finances?

Sharing finances with your partner depends on your comfort level, trust, relative income levels and, ultimately, the dynamics of your relationship. As a newlywed, I can relate to the complexity around this as well. To help aid the conversation necessary around merging finances as a couple, here are three ways it can be approached.

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Method 1: Keep Finances Completely Separate

This is a “your money is yours, and my money is mine” approach to saving and spending. Each partner will retain their individual bank accounts, and they won’t have a shared account. They’ll each contribute a portion of their income toward shared expenses, including things such as entertainment subscriptions and mortgage payments.

Pros:

Retains independence of finances; you don’t need permission to purchase something you want with your own money.
Makes working toward individual financial goals (retirement, investments, etc.) clearer.
Keeps finances separate, which is a good fail-safe in case of a breakup.

Cons:

Disproportionate income between partners can complicate how expenses are split. For example, the higher earning partner wants to spend more on a vacation, while the lower earning partner has a lower budget.
This method does not work for one-income households.
Splitting expenses can become tedious, especially if there isn’t a system or understanding in place. For example, one partner pays for groceries, while the other partner pays for dining out.

Method 2: Go the Semi Separate Route

This is when a couple has a joint bank account where both partners contribute some money to be used for shared expenses, but each partner still retains their individual bank accounts for their personal expenses.

Pros:

Like the separate account strategy, it retains some independence; you don’t need permission to purchase something you want with your own money from your separate account.
It also makes working toward individual financial goals (retirement, investments, etc.) a bit clearer.
Covers essential joint spending via joint bank account.
Leaves room for contingency if the couple breaks up.

Cons:

Accounting and splitting can get tricky, as this method requires more communication, where both have to work on finances together.
Doesn’t work for certain scenarios if there’s significant disproportionate income between partners.
If partners have significantly different money perspectives (or one has a spending problem), having access to the other partner’s money through a joint account can be challenging.
This method does not require a partner to be as transparent with their expenses, however, their actions can still impact their significant other negatively. For example, if one partner splurges their entire paycheck on a TV and doesn’t have enough money to contribute to the joint account that month, both partners are financially limited by this decision.

Method 3: Go All-In Together

This is when a couple’s finances are completely joined, with a “your money is our money, and my money is our money” approach to saving and spending.

Pros:

Easy to implement.
Transparency in all transactions.
Can work well for couples with disproportionate income or a single-income household.

Cons:

If partners have differing money perspectives (or a spending problem), having complete access over the other partner’s finances can be challenging.
May be difficult to work on individual financial goals.
If early into the relationship, this could be risky if you haven’t established trust yet.

Which Type is the Best for You and Your Partner?

In my opinion, the only way to approach this is by having a sincere conversation with your partner. It can be a tough conversation to have, but it’s necessary to achieve whatever you and your partner have set for financial goals. You will need to be honest and forthcoming with each of your financial situations, and you should approach the talk empathetically.

Some questions you may want to ask yourself and your partner:

How does money make you feel?
What do you think about budgets?
What are your debts?
What are your financial goals?
If you were to come across $5,000 today, what would you do with it?
What’s your credit score?
What’s your current net worth? (Total assets minus total liabilities.)
Who do you trust with your money and why?

Should We Merge Finances If We’re Not Married?

I’ve gotten quite a few texts from unmarried users who are considering merging their finances with their significant other, and I think that it’s definitely a worthwhile discussion if you are in a serious committed relationship, especially if you live with your partner or share noteworthy expenses.

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One thing to consider if you and your partner are living together is creating a cohabitation agreement. This specifies how expenses should be divided, how to handle debt and what happens in the event of a breakup.

How Do I Fairly Combine Finances If My Partner Makes More Money Than Me?

Sometimes equal payments does not mean equitable contributions. For couples who have disproportionate levels of income and use the semi-separate or separate approach to merging finances, it may make more sense to have the higher income earner contribute a larger portion toward shared expenses.

For example, let’s say the wife earns $100,000 per year, while the husband earns $50,000 per year, bringing the total combined household income to $150,000 per year. It may be more equitable for the wife to contribute 66% of her income toward the joint account and the husband contribute 34%, instead of splitting down the middle at 50/50. Keep in mind, this also depends on the dynamics of your specific relationship.

The Bottom Line

Whether you are an engaged couple planning your wedding for 2022, a couple who have newly moved in together, or a married couple celebrating many years together, it’s never too late to talk to your partner about how to handle your finances together. Remember to keep each other’s point of view in mind, be genuine and open during the conversation, and challenge each other to achieve your financial goals together. These tools mentioned can help guide the conversation, but it will be up to you and your partner to put a plan into action.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mark Reyes is a Financial Advice Manager at Albert with nearly a decade of experience in the finance industry. He is passionate about financial planning, client service and non-profit financial literacy programs. Mark earned his bachelor's in economics from UCLA and is a CERTIFIED FINANCIAL PLANNER™ professional.